FIXING THE GRID (Photo courtesy of Southern Co).

Whatever the official investigations eventually conclude, enhanced investment in the North American transmission system will have to be a part of the answer to the Aug. 14 blackout. Despite differing views on solutions, most sources agree the electrical system needs development because it has been cash-starved and fervent local opposition often has blocked efforts to expand it.

Between $30 billion and $60 billion of investment is required to bring the grid up to the state of the art and open its congested arteries, essentially doubling the asset base, says Elliot Roseman, principal with ICF Consulting, Fairfax, Va.

Investment in the grid has trended steadily downward since 1989, in disturbing contrast to the trend in load growth and investment in generation construction. "In the last 20 years, there’s been a negative investment in transmission of $100 million per year," says Peter Rigby, director of utilities, energy and project finance at Standard & Poors, New York City. S&P, like ENR, is a division of the McGraw-Hill Companies.

Industry groups, politicians, regulators and others long have raised the call for new investment in transmission. But a combination of siting and financial obstacles has blocked effective action, says Roseman. A "balkanized" permitting process hamstrings line siting, he says.

The process, unchanged since the time when vertically integrated utilities planned generation and transmission for their own largely protected service areas, is ill-suited to today’s market, where huge blocks of power wheel across several states. "Any line 230-kv or above should have a joint basis, maybe under a regional transmission organization, [the National Association of Regulatory Utility Commissioners, the Western Governors’ Association] or something else," he says.

COMMAND AND CONTROL Independent system operator in New England blocked outage. (Photo courtesy of ISO-New England)

Financial incentives for investors in transmission projects also have been lacking. Equity funds, pension funds, construction companies and operation and maintenance companies might be willing to invest in new transmission if they could obtain a stable profile of regulated returns, Roseman argues. Rigby says states have allowed an average return on transmission investment of 11.6%. But Trans-Elect Inc., Washington, D.C., which privately owns and operates transmission systems, considers 14.5 to 15% to be the acceptable range for private investment in new construction, says Bob Mitchell, executive vice president.

ISOs and RTOs can best assess where the investment could do the most good for their regions, says Roseman. Utilities without proper metering, data and monitoring equipment will need technology upgrades, possibly in addition to new or upgraded lines. Other technology promises to increase the capacity of existing lines without additional construction in the right-of-way. For example, a convertible static compensator recently installed by the New York Power Authority at its Marcy Substation uses solid-state power electronics to control power flows, increase line capacity and improve reliability (ENR 6/21/99 p. 14).

Mandatory standards for reliability and interconnections would clear some of the fog from the decision-making process, says Roseman. In the absence of mandatory standards, some operators have run their systems close to and even over their design limits, masking shortcomings in the grid, he says. Making the standards mandatory would reveal where the system is underpeforming.

The blackout has improved the odds for passage of energy legislation in Congress. Provisions to stimulate spending on transmission may be included.

A conference to reconcile the House and Senate bills is expected to begin soon after Congress returns from its August recess. The House-passed version has several incentives for transmission infrastructure. The Senate version has fewer.

The omnibus energy bill that the House approved in April would allow transmission lines to be written off in 15 years, compared with 20 years now, change the provisions for gains utilities realize when they sell transmission facilities to an RTO or independent transmission company and have the Federal Energy Regulatory Commission establish "incentive-based...rate treatments."

Edison Electric Institute, Washington, D.C., says the last item involves higher rates of return than now permitted. The Senate bill also has a provision on treatment of transmission asset sales.

In addition, the House measure would direct the Dept. of Energy to study "electric transmission congestion." That could lead to the DOE Secretary’s designating "interstate congestion areas." FERC then would be authorized to issue permits to build or modify transmission facilities in those "congestion areas" if a state is unable or unwilling to do so. It also would allow acquisition of needed rights-of-way for such lines by eminent domain proceedings in federal court.

Utility companies would love to see the House provisions included in the final version. "While there is clearly no single magic bullet to achieve this, we believe strongly that House and Senate lawmakers have an unparalleled opportunity to craft a final legislative product that contains critically important steps to help ensure electric system reliability and bolster transmission capacity," says EEI President Thomas Kuhn.

NEW DEAL Marcy substation is high-tech. (Photo courtesy of NYPA)

"Clearly the Republicans are looking at a broader bill, and maybe even some Democrats, but…there are some other Democrats that want to peel off…something to deal with the reliability issue," says Casey Dinges, the American Society of Civil Engineers’ managing director for external affairs. He feels that in the wake of the blackout, Congress must act on energy legislation.

But the Southeast has resisted pressures to restructure for good reason, say utility owners in the region. Electricity prices there are low and reliability is high. Neither Atlanta-based Southern Co. nor Raleigh-based Progress Energy is particularly interested in forming a regional transmission organization, as FERC has urged. "We’re working on putting an agreement together, but there is no timeline," says Todd Terrell, a Southern Co. spokesman. Progress officials say the momentum for establishing an RTO just isn’t there any more.

Both companies are investing in new transmission infrastructure. Southern Co. has spent $3.7 billion on transmission since 1999, including upgrading substations and lines to higher voltage and 206 miles of new lines. It plans to spend another $4.4 billion through 2006.

Georgia Transmission Co., which builds for the utilities that co-own it, last year had serious trouble building new lines. Several county governments banned construction of new high-voltage lines for three years. The Georgia Supreme Court overturned the ban in January. Still, Georgia Transmission is finding it more and more difficult to place lines to meet need and build in reliability, says spokesman Craig Heighton. "The question is always, ‘Who says there is a need?’" he says.

Georgia Transmission has a 99.997% reliability rate in spite of the 47% increase in demand over the past 10 years. "We’re putting in millions of dollars worth of infrastructure and it’s not for unneeded systems," says Heighton.

Waukesha, Wis.-based American Transmission Co.’s Arrowhead-Weston 345-kv transmission proposal in northwest Wisconsin has been one of the country’s most famous examples of the difficulty facing new transmission construction. The estimate for the 220-mile line jumped from about $150 million to $396 million last November because of cost escalation in the four years since the project was first proposed and added costs to mitigate impacts on the environment and the communities in the line’s path (ENR 11/18/02 p. 7). An activist group has opposed construction, urging instead the development of alternatives.

For some, the solution lies in returning to an older model. In a study for the American Public Power Association published last November, Kiah E. Harris, power supply planning engineer at Burns & McDonnell Engineering Co., Kansas City, found that "the industry is moving back to a world where traditional utilities are building generation in many locations," thus avoiding the need for major transmission additions.

"In today’s situation, the parties have no control over the transmission system and, therefore, generation must be sited as close to load centers as possible," he wrote. "A by-product of the FERC [proposed standard market design] is that it will encourage further reduction in the reliance on the transmission system for firm deliveries."

Because of the "forced interest in local generation,…the transmission system is ever more being relegated to nonfirm energy usage, and its expansion is becoming less important on a system-wide basis," he wrote. Far from prompting a new wave of transmission investment, reliability concerns may lead instead to greater investment in smaller powerplants to serve local loads. "Today’s uncertainty is telling many parties to take the smaller plant size, site it local to the load so minimal transmission is needed and forgo economies of scale," Harris wrote.